Exam 17: Divisional Performance Evaluation

If each division of a company with a monopoly niche is allowed to set its transfer price at the profit-maximizing level for the next division as the product flows toward the consumer (assuming no external market for the product),then prices will:

If a company division is operated as a revenue center and its demand curve is P = 200 - 2Q,how many units should it produce per day?

In terms of using accounting data to build an effective management control system,what is the nirvana fallacy?

If a corporation operates two divisions that supply one another,and each division is located in a different country,then transfer prices are:

The choice of transfer-pricing method:

What is transfer pricing?

Refer to Figure 17.1.Which of these will hold true if the manager is given a budget of $155?

Always Round Tire's new division,Start-up Batteries,finds that its total cost curve,TC = 300 + 2Q + 2Q² and its demand curve,P = 130 - 2Q. If the division is operated as an independent profit center,what will be the price and quantity sold each day? Will the division make a profit? If the division is operated purely as a revenue center,how many batteries will they sell each day? If the division is operated as a cost center and told to produce 20 batteries per day,what would be the cost per battery?

The accounting department had a plumbing problem and they called the maintenance department to fix this.After the job was done,the maintenance department sent the accounting department a bill for services rendered.Does this make sense? After all they are all a part of the same company?

What are the common transfer pricing methods?

Transfer price refers to the price at which:

A manager in an investment center is offered a potential investment that would have an ROA of 15 percent.After the investment,it would make up 20 percent of his total portfolio.Currently,he makes 20 percent on his portfolio,though the company requires only 12 percent.Which of the following is true?

One of the problems of transfer prices comes from the successive impact of the prices as the product moves downstream toward the consumer.At each step,the transfer price becomes the ______ for the next part of the company.

Which of these is a commonly used measure of performance for investment centers?

Economists often remark that accounting data are purely historical and at an aggregate level and do not provide information on incremental changes.So why is it the key data source for decision control and important in decision management?